Gift Letters for Mortgage: Create Yours Now With Our Free Tool
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Richard Haddad Executive EditorClose
Richard Haddad Executive EditorRichard Haddad is the executive editor of HomeLight.com. He works with an experienced content team that oversees the company’s blog featuring in-depth articles about the home buying and selling process, homeownership news, home care and design tips, and related real estate trends. Previously, he served as an editor and content producer for World Company, Gannett, and Western News & Info, where he also served as news director and director of internet operations.
If you’re getting help from a family member or friend to cover your down payment, your lender will likely ask for a gift letter. This document helps verify that the funds are truly a gift, not a loan that could affect your ability to repay the mortgage.
Gift letters for mortgage companies are a common part of the homebuying process, especially for first-time buyers. But it’s important to get the format right and understand the rules around using gifted funds.
In this post, we’ll explain what a gift letter is, what it should include, and how to create one in minutes with our free tool.
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What is a gift letter for a mortgage?
A gift letter is a formal document that tells your lender someone has given you money to use toward your home purchase, and that you’re not expected to pay it back.
Lenders require this documentation because it helps them determine your actual debt load and financial stability. Without a gift letter, gifted funds could be mistaken for a loan, which might change your debt-to-income ratio and affect your loan approval.
What should a gift letter include?
A mortgage gift letter doesn’t need to be long, but it does need to include a few key details:
- The name and address of the person giving the gift
- Your name (as the buyer or borrower)
- The amount of the gift
- A clear statement that repayment is not required
- The donor’s relationship to you
- The address of the home you’re buying
- The date the funds were transferred
- The donor’s signature
Lenders may also request a copy of the donor’s bank statement and proof of the funds transfer. These steps help confirm the money came from a legitimate source and won’t impact your loan terms.
Create your gift letter now (free tool)
Don’t want to start from scratch? Use our free Mortgage Gift Letter Generator to quickly create a lender-approved letter with all the right details.
Just fill in a few fields — like your name, the gift amount, and your donor’s information — and your personalized gift letter will be ready to download or print. It’s the fastest way to check this task off your mortgage to-do list.
The following sections will walk through who can gift money, rules by loan type, and important things to know before using gift funds.
Who can gift money for a down payment?
If you’re buying a primary residence, most lenders allow gift money to come from a relative or someone with a close relationship to you.
While there are some exceptions depending on loan type, eligible donors typically include:
- A parent, grandparent, or sibling
- A spouse or domestic partner
- A fiancé or fiancée
- A close friend (if you can document the relationship)
What doesn’t qualify? Funds from the seller, a builder, or any party with a financial interest in the transaction are generally not allowed. Lenders want to ensure that the gift is genuine and not a disguised incentive or side deal.
Gift letter rules by loan type
Each type of loan has slightly different guidelines when it comes to gift funds. Here’s a quick overview of what to expect when buying a primary residence:
| Loan type | Who can give the gift? | Are there limits or conditions? |
| Conventional loan | Family members, domestic partners, in-laws, fiancés | Gift can cover all of the down payment and closing costs if it’s a primary home. Some loans may require borrower to contribute a portion if credit is limited or the loan has risk factors. |
| FHA loan | Relatives, employer, close friend, government agency, or charitable organization | Allowed to cover 100% of down payment and closing costs. Must be documented with a letter and transfer proof. |
| VA loan | Family, friends, employer, nonprofit, or government agency | No down payment required for most VA loans, but gift funds can still be used for funding fees or closing costs, but not for cash reserves. |
| USDA loan | Family, friends, nonprofits, or employers | Like VA loans, USDA loans don’t require a down payment, but gifts may be used for closing costs. Documentation is still required. |
Tax implications for gift funds
As the buyer, you won’t pay taxes on the gift money you receive for your down payment. But the person giving the gift might need to report it, depending on the amount.
As of 2025, the IRS allows someone to gift up to $19,000 per year (or $38,000 for a couple) to another person without needing to file a gift tax return. Gifts over that threshold must be reported using IRS Form 709, but this doesn’t automatically mean taxes are due, it just reduces the donor’s lifetime gift and estate tax exemption.
Here’s what to keep in mind:
- If your parents each give you $19,000, that’s a total of $38,000 — no reporting required.
- If your aunt gives you $25,000, she’ll need to report the gift, but won’t likely owe taxes.
- You, as the buyer, don’t need to report the gift or count it as income.
Because tax rules can change and situations vary, it’s smart for donors to check with a tax professional before giving a large gift.
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Alternatives to down payment gifts
Not every homebuyer has access to a large gift, and not every donor is comfortable giving one. Fortunately, there are other ways to help with a down payment or support someone on their path to homeownership:
- Help with closing costs instead: A smaller cash gift or contribution toward closing costs can still go a long way, and may feel more manageable for the giver. These costs can often be covered with less documentation than a full down payment gift.
- Co-sign the mortgage: If a buyer needs help qualifying, a close relative can co-sign the loan. Just be aware that co-signers don’t get ownership of the home, but they do share legal responsibility for the debt.
- Become a co-borrower: In this scenario, the donor is added to the loan and the title, meaning shared ownership, shared responsibility, and full participation in the loan application.
- Offer affordable rent to help save: Letting your child or loved one live at home while saving for a home purchase can make a big difference. Even charging modest rent can help instill saving habits while allowing the buyer to grow their down payment fund.
- Buy the home and arrange repayment: In some cases, a parent may choose to purchase the home outright, then have the child repay them over time. This is a complex route that should involve a real estate attorney and careful documentation.
- Buy before you sell to unlock equity: If you’re already a homeowner, HomeLight’s Buy Before You Sell program can help you tap your current equity and avoid relying on outside gifts or bridge loans. Watch this 80-second video to see how it works.
Each of these alternatives comes with its own risks, responsibilities, and paperwork, so it’s wise to talk to a trusted lender or financial advisor before moving forward.
Final take: Gifts and guidance can bring you home
If you’re using gift money to buy a home, make sure the paperwork is rock solid, and that starts with a proper gift letter. Use our free Mortgage Gift Letter Generator above to create yours in minutes, or reach out to a top real estate agent who can help guide you through every step of the buying process.
HomeLight’s Agent Match connects you with trusted, high-performing agents who understand the ins and outs of using gift funds and other financing tools.
You can also explore HomeLight’s buyer tools below to compare your options and move forward with confidence.
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